he following information is taken from the accounts of Latta Company. The entries in the T-accounts are summaries of the transactions that affected those accounts during the year.

Manufacturing Overhead Work in Process
(a) 460,000 (b) 390,000 Bal. 15,000 (c) 710,000
260,000
Bal. 70,000 85,000
(b) 390,000
Bal. 40,000

Finished Goods Cost of Goods Sold
Bal. 50,000 (c) 640,000 (d) 640,000
(c) 640,000
Bal. 50,000

The overhead that had been applied to production during the year is distributed among the ending balances in the accounts as follows:

Work in process, ending $19,500
Finished goods, ending $58,500
Cost of goods Sold $312,000
Overhead applied $390,000

For example, of the $40,000 ending balance in work in process, $19,500 was overhead that had been applied during the year.
Assume that the company closes any balance in the manufacturing overhead account directly to cost of goods sold. Prepare the necessary journal entry.

The question is to prepare the necessary journal entries based on the assumption that the company closes any balance in the manufacturing overhead account directly to cost of goods sold

In order to prepare the journal entry, we understand the implication of closing balance in the manufacturing overhead directly to COGS

First, based on the debit and corresponding credit rule, we debit Cost of Goods Sold with 70,000 which is the balance of manufacturing overhead and then Credit Manufacturing Overhead with 70,000 to show that it has been closed out to Cost of Goods sold

Description Debit Credit

Cost of Goods Sold $70,000

Manufacturing Overhead $70,000

Being the closure of the under applied manufacturing overhead to Cost of Goods sold.